TDC Reports H1TDC Reports H1

Revenue up 0.4% and EBITDA up 1.6%

Strong growth within pay-TV and TDC Nordic

Gross profit increase in mobility services despite fierce price competition

Profit from continuing operations excl. special items up 34.7%

Strong 12.9% growth in equity free cash flow

Net interest-bearing debt to EBITDA of 2.0x

Domestic mobile subscription base up 67k excl. Onfone; Onfone contributed an additional 193k (prior to migration churn)

Continued pressure on residential mobile subscription ARPU due to price competition

2011 guidance confirmed

Expected 2011 dividend: DKK 4.35, of which DKK 2.18 will be distributed on 10 August 2011

Onfone is included in TDC’s financial reporting with effect from the completion of the acquisition on 18 May 2011. For 2011, the acquisition of Onfone is expected to contribute revenue of approximately DKK 200m. The impact on EBITDA for 2011 is expected to be limited, due to Onfone not contributing to TDC's EBITDA until the Onfone customers have been migrated to TDC’s network, as well as one-time costs related to the customer migration.

Revenue
In H1 2011, revenue in the TDC Group increased by 0.4% or DKK 53m to DKK 13,151m compared with H1 2010.The increase in revenue related mainly to the domestic TV business segment, TDC Nordic and sales of terminal equipment, mainly mobile handsets. The increase in TV revenue resulted from more subscribers and higher ARPU for YouSee Cable TV as well as TDC IP-TV. TDC Nordic’srevenue growth was a result of increased activity in mobility services, landline voice, IP-VPN and hosting. The revenue growth was also affected by positive exchange-rate developments. The significant growth in the sale of terminal equipment was driven primarily by higher demand for smartphones. The acquisitions of Onfone in Q2 2011 and the hosting business DIR in Q1 2011 also contributed positively to revenue growth.

The increase in Group revenue was partly offset by lower domestic landline telephony and broadband revenue in both the residential and business segments. The decline in domestic landline telephony reflected the migration from traditional landline telephony to VoIP and mobile telephony, whereas fierce competition was the main driver for the decreased revenue in the broadband business, reflected by a decline in RGUs and ARPU. Further, domestic mobility revenue was negatively impacted by regulation of mobile termination rates (MTR), and international roaming charges. However, in spite of continued high price competition in the mobile market, domestic mobility services revenue adjusted for regulatory impact and the acquisition of Onfoneremained flat.

Gross profit
Gross profit for H1 2011 declined by 1.2% or DKK 113m to DKK 9,624m compared with H1 2010. The decline was driven mainly by a shift in product mix. Growth in areas with relatively low margins such as the TV business, terminal equipment and TDC Nordic were more than offset by decreased activity in high-margin areas such as landline voice and broadband. Although revenue remained flat for domestic mobility services, there was slight growth in gross profit adjusted for regulatory impact and the acquisition of Onfone.

The gross profit margin decreased from 74.3% in H1 2010 to 73.2% in H1 2011.

EBITDA
Group EBITDA increased by 1.6% or DKK 83m to DKK 5,345m compared with H1 2010. This led to a slight increase in the EBITDA margin, from 40.2% to 40.6%. EBITDA growth was driven by lower external expenses as a result of implementing general cost-saving measures throughout the whole organisation, which is reflected by lower IT and facility management costs, reduced fault rates and lower costs for mobile subscriber acquisitions. Improved processes and the continued migration from landline to mobile have also resulted in lower wages, salaries and pension costs due to fewer full-time employee equivalents (FTEs). The OPEX savings were partly offset by the increased marketing spending, driven by thecompetitive environment in the domestic residential mobile market in particular.

Profit for the period
Profit for the period, excluding Special items and discontinued operations, amounted to DKK 1,630m, up by DKK 420m, or 34.7%, compared with H1 2010. The increase was due largely to lower expenses from net financials resulting primarily from the positive development in fair value adjustments and the effects of the refinancing completed in Q1 2011.

Profit for the period, including Special items and discontinued operations, increased by DKK 344m, or 37.4%, to DKK 1,265m from DKK 921m in H1 2010. Profit from discontinued operations declined due to the divestment of Sunrise in 2010, while net expenses from special items developed positively, reflecting mainly the gain from the divestment of shares in Nawras. However, special items were negatively impacted by a provision relating to a Swedish court ruling in a dispute relating to interconnect fees.

TDC A/S (Copenhagen: TDC)